VAT Rates in India

VAT or Value Added Tax is a tax added to the goods at each step of the production and distribution process. VAT tax however is ultimately paid by the end consumer, as dealers are allowed to collect VAT tax on their sales, retain the tax paid on their purchases and only pay the balance to the Government. Unlike service tax, VAT is still governed by the State Government by separate VAT act passed by each of the state in India under the guidelines issued by an Empowered Committee to ensure uniformity. Therefore, the procedure for VAT Registration, the VAT Rates, due date for VAT payment, deadline for VAT Return Filing and other modalities differ from State to State. In this article, we look at the VAT Rates prevalent in some of the major states in India and the relevant schedules:

VAT Rates in India

The VAT Rates in India will differ based on the type of goods and from State to State. Therefore, it is important for the Entrepreneur to be conversant with the State's regulation with respect to VAT. However, VAT Rates in India can be divided into three main categories, which are common for many states:

VAT Exempted Category / NIL VAT Rate

In many states, items that are sold by the unorganized sector in natural or unprocessed format and basic goods for the poor are listed under the VAT exempted category. Some of the items that may be VAT exempt in many state include: aids used by handicapped persons, glass or plastic bangles, condoms, firewood, khadi, salt, etc.,

1% VAT Rate

In many states, 1% or 2% VAT Rate is applied for precious stones, precious metals like silver, gold and platinum, bullions, jewellery, etc.,

4% or 5% VAT Rate

Many states have adopted a VAT Rate of 4% or 5% for a large number of basic necessity goods. Some of the goods included in this category in many of the States include coffee, coir, cotton, edible oils, medicines, drugs, agricultural implements, etc.,

General VAT Rate

In addition to the above VAT Rates, many states also have other levels of VAT based on the Goods. Very high VAT Rate of over 20% is usually levied for goods such as imported liquor, cigarettes, etc., Many states also have a General VAT Rate of around 12.5% which is meant as a catch-all for goods not falling in any of the listed category. This category of goods not falling in any of the other category are usually taxed at 12.5% or 13.5% or 14% depending on the State.

VAT Rates in India by State

The following are the prevalent VAT Rates in some of the major States of India:

As VAT rates change based on the State and the goods being sold, it is important for the dealer to be fully aware of the relevant VAT Rates for the goods or products sold by the dealer and comply with the relevant regulations.